Janki Nath Paul vs Dhokar Mall Kedar Bux

Courtney-Terrell, C.J.—This is an appeal by the defendant second party from the judgment of the Subordinate Judge of Darbhanga.

The plaintiffs are a firm of merchants dealing in chillies, tobacco and similar produce and have their place of business at Dalsingserai. The defendant first party, who is a merchant, collects produce of this nature from the provinces and sells them at Jhalokati in the district of Barisal in Bengal and employs amongst other people the defendants second party who are a firm of commission agents also carrying on business at Jhalokati. The method of conducting business is that the defendant first party occupies the position of a jobber and the defendants second party are in effect brokers. The defendant first party is said to carry on a bepari business, while the defendants second party arc said to do arhatdar and charge an arhat or commission of recognised percentage to vendors or to purchasers who do business through them.

In the course of his bepari business the defendant first party from time to time purchased chillies from the plaintiff''s firm and made payments at Dalsingserai. The case alleged in the plaint is that a certain contract for sale of chillies was arranged between the plaintiffs and the defendant first party and the defendant second party stood surety for the liabilities of the defendant first party to the plaintiffs. The consideration for this contract, that is to say, the advantage moving from the plaintiffs to the defendants second party for entering into this alleged contract is not stated in the plaint. It is said that there was an adjustment of accounts and that a sum of Rs. 5,700 odd was due by the defendant first party to the plaintiffs for goods supplied. The defendant first party admits the indebtedness The defendants second party deny the alleged contract of surety ship though they are not prepared to dispute the liability of the defendant first party to the plaintiffs. The trial of the case in the Court below and in the course of this appeal was made more difficult by the lack of a clear appreciation of the nature of the contract sued upon, the obscurity of the pleadings and by reason of the defendants second party having set up an unnecessary and dishonest plea. The defendants second party were sued in the firm name of Sitanath Paul Jankinath Paul. Jankinath Paul is an individual who is a brother of Sitanath Paul and service was effected upon him on the allegation that he was a member of the firm. In addition to the simple case that there was no contract of surety ship he alleged that the firm Sitanath Paul Jankinath Paul had been wound-up and ceased to exist.

The nature of a partnership seems to have been ill-understood both by the lawyers and by the Judge and there even was some confusion manifested in the arguments before us. A "firm" is not a legal personality but a mere partnership. One of the tests of partnership is whether there was a binding contract of mutual agency between the partners. It was established to the satisfaction of the Subordinate Judge and we entirely agree with him not only that the firm of Sitanath Paul Jankinath Paul is still in existence but that the individual Jankinath Paul is most certainly a partner in that firm. Moreover Jankinath Paul has endeavored to establish that he is now a partner in a firm which carries on business under the name of Sarda Sundari Pal. It is clear that Sitanath Paul Jankinath Paul is merely another name for the same business which is carried on under the name of Sarda Sundari Pal, and that Jankinath Paul and his brother Surendra Nath Pal, who has given evidence, are members of that partnership. The fact is that some years ago the third brother Sitanath Paul, who was a member of the same firm, died. Litigation has proceeded between the widow''s of Sitanath Paul and the surviving members for their share of the business and a new name has been adopted having for one of its reasons the defeat of the claim of these widows and it is quite probable for another reason connected with the returns to income tax. The evidence has shown that both names, that is to say, Sitanath Paul Jankinath Paul and Sarda Sundari Pal are employed by the existing partners and this defence was clearly taken for ulterior reasons and has no substance. A further piece of dishonesty on the part of Jankinath Paul has occurred in his denial of certain documents. This is an, instance of the prevalent and stupid practice of setting up a false and dishonest case when a simple and straightforward defence could successfully have been maintained. It was no doubt due to his dishonesty in this matter that the defendant second party lost his case in the Court below.

Contracts of guarantee that is to say contracts to perform the promise or discharge the liability of a third person in a case of his default should, If relied on, be proved strictly. Under English Law writing is required to evidence such a contract. It is true that this is not the case under Indian Law but the need for strictness of proof is as great if not greater in India than in England. I have said that the plaint does not state that the plaintiffs agreed to supply defendant 1 with goods in consideration of defendant 2 guaranteeing his account, and indeed the evidence itself discloses no consideration to defendant 2 of this or any other kind for his entering into the alleged surety ship. The learned Subordinate judge in dealing with the alleged contract of surety ship was constrained to admit that there was nothing in writing to evidence the existence of such a contract but he relied upon two pieces of evidence, the first is that of a witness named Pallo Choudhry, a cultivator and trader of Beguserai, whose evidence on this point is confined in chief to the following two sentences:

I have dealings in chilli with the firm of defendant second party. The defendant second party stood surety for all dealings between the plaintiff and defendant first party in Aghan in 1337

In cross-examination which seems to have been most inefficiently conducted, he said that the plaintiff''s servant Moti Singh "had gone there on demand." The meaning of these words is obscure. He then adds:

The defendant second party suggested that goads should bo consigned to Dwarikanath Pal (i.e., defendant first party) who was his man. Dwarikanath was also there. There were many other customers. Moti did not ask anything in writing.

There is the evidence of a mahajan named Puran Mull that the defendants second party stood surety for defendant 1 but neither in chief nor in cross-examination did he state that he was a witness to the contract and it would appear that he is merely under the impression that that was the case. Neither of these witnesses suggests that the plaintiffs were induced to supply goods to the defendants first party by the offer of a guarantee of liability by the defendant second party.

Now the second kind and main evidence relied upon by the Subordinate Judge was as to circumstances which took place after the plaintiffs had begun their suit and were pressing the defendant first party. The plaintiffs had obtained an order for attachment before judgment of certain goods of the defendant first party at the godowm of the defendants second party. Moti Singh''s evidence in examination-in-chief was confined to this incident. He slated that Jankinath Paul offered to pay Rs. 2,500 and to pay the rest gradually. He. Moti Singh, said that he could do nothing without the malik''s consent. Letters were sent to the plaintiff asking him not to press the defendant first party, stating that there was a quantity of chilli in the godown of the defendants second party and offering to send money when this chilli was sold and protesting that there was no necessity for the filing of a suit against the defendant first party. There is not a word of evidence which would suggest that in consideration of this offer the plaintiffs gave time to the defendant first party and indeed the offer seems to have been of no avail in arresting the legal proceedings against the two defendant. It was not until he was cross-examined with the usual inaptitude that Moti Singh made any mention of the contract actually sued upon and. he then apparently remembered the way in which the plaint had been drawn and then and not before set up a case that the defendants second party had proposed to the plaintiffs that the purchases should be made by the defendant first party and that the defendants second party would guarantee the account. Moreover the two supposed contracts, if there ever were two contracts, differ completely the one from the other. The contract sued upon is one said to have been entered into by the plaintiffs with the defendants second party that the plaintiffs would supply goods to the defendants first party on credit (it may possibly be implied in consideration for a contract of guarantee by the defendants second party. The second alleged contract was one in which the plaintiffs refrained from suing the defendant first party on consideration of the defendants second party paying the account for which a suit had been entered. The circumstances alleged to support the second contract are not a "ratification" of the first and the from "ratification" is a complete misnomer. Ratification is used to express the conduct of a principal who endorses the action of his agent which had at first taken place without the principal''s authority : it has no application to the present circumstances and the circumstances, as alleged, of the second contract are not even evidence of the existence of the first contract, for it may well be that one may intervene to guarantee a debt which has been incurred by a friend or business colleague, but it cannot be inferred from this fact that one has originally guaranteed the performance by him of the contract which has in fact given rise to the debt. Moreover the third illustration to S. 127, Contract Act applies to this case:

A sells and delivery goods to B.C. afterwards without consideration, agrees to pay for them in default of R. The agreement is void.

In any case the second set of circumstances do not give rise to the alleged contract upon which the suit was brought. In the very nature of business relationship it is most unusual, as indeed has been pointed out by the commercial witness for the defendant, for one in the position of a broker to guarantee the contracts of a jobber and if he enters into such a contract it would seriously damage his commercial reputation. It is most important therefore that contracts of guarantee should be strictly proved and the consideration for the alleged contract should be stated and established and this is the more so where a regular market organization exists, otherwise the conduct of business becomes very insecure. It is essential for the good organization of a market that the custom of merchants which is the foundation of mercantile law should be supported and should form the basis of presumptions and that these presumptions should not be rebutted save upon cogent evidence.

It is clear that the judgment against the defendants second party must be set aside with costs but having regard to the dishonesty of defendant 1 in raising the issue of the identity of his firm and denying the authorship of the letters which, as has been clearly established, emanated from that firm. The defendants second party will recover one half only of the costs taxed in their favour.

Dhavle, J.

The deed of gift executed by Sarda Sundari De Pal in favour of Janki Nath De Pal and his brothers in January 1926, Ex. 1, shows that a business was carried on under the name of Sitanath Paul jankinath Paul by Sitanath and his brothers after their father''s death in 1305 B.S. Sitanath, the eldest son died in 1326, and the business was then carried on by the surviving brothers. In 1331 there was another business started in the name of Sarda Sundari Pal, and by the deed of gift the mother, Sarda Sundari, transferred her interest in it to five sons. Whether or not the business carried on in the name of Sitanath Paul Jankinath Paul was formally wound up seems immaterial so far as the liability sought to be enforced in this suit is concerned, because the evidence shows that the same brothers were carrying on business under either name indifferently, and continued to receive invoices and consignments and send out communications, in the old firm name, down to the institution of the suit. The finding of the learned Subordinate Judge is amply borne out by the evidence that:

the truth seems to he that although the defendant second party might have changed the name of the firm, the mousse customers always carried on business in the name of the old firm, and as the proprietors of the old and the new firms were the same set of people, the latter also did not take notice if they were addressed in the new or the old style.

The attempt of the appellant to escape liability on the ground that the firm Sitanath Paul Jankinath Paul ceased to exist five years before the suit was thoroughly dishonest, and it does not help the appellant that it appears from the written statement and the evidence of Dwarkanath, the man who conducted the bepari business in the name of the defendant first party, that it was the appellant and appellant alone that carried on the dishonest dispute. The position is not improved for the appellant by reason of the denial by the defendant second party of the telegram (Ex, 2) and the postcards (Exs. 3 and 3 (b) to 3 (d), which are proved to have been received in the ordinary course of business by the plaintiffs, together with the denial of Ex. 3 (a), which has been similarly proved and which from the contents would appear to have emanated from Dwarkanath, though it is unsigned, and was written by a servant of defendant second party whose son wrote Ex. 3 (d).

As to the question whether the defendant second party did or did not stand surety for the debts of defendant first party, the learned Subordinate Judge observes that though there is nothing in writing to show that the defendant second party stood surety for the liability of the defendant first party, the plaintiffs have adduced oral as well as documentary evidence to show that they ratified their surety ship by negotiating for a compromise when a writ of attachment was served on their firm after the institution of the suit. (After discussing the evidence, his Lordship held that the plaintiffs'' case was not proved and concluded. The appeal must therefore he allowed, and 1 agree in the proposed order about costs.